ECON 201 Old Tests 2
If the reserve requirement is 15% and a bank has $ 100 million in demand deposits, then how much must that bank hold in reserve? a.$ 15 million b.$ 150 thousand c.$ 25 million d.$ 100 million
a.$ 15 million
If the reserve requirement is 10% and a bank has $ 30 million in demand deposits, then how much must that bank hold in reserve? a.$ 3 million b.$ 300 thousand c.$ 30 thousand d.$ 30 million
a.$ 3 million
In the simple circular flow diagram of the economy: a. Households are the suppliers of resources and the demanders of products. b. Businesses are the suppliers of resources and products. c. Households are the demanders of products and government is the supplier of resources. d. Businesses are the demanders of resources and government is the supplier of resources.
a. Households are the suppliers of resources and the demanders of products
*An increase in aggregate supply will cause a. deflation and an increase in real GDP b. an increase in nominal GDP and inflation c. a recession and an increase in the price level d. a rise and then a fall in the business cycle
a. deflation and an increase in real GDP
*The discount rate is the a. interest rate that banks pay the Federal Reserve for loans b. percentage discount that banks receive on purchases of stocks c. interest rate that banks charge other banks for loans d. discount on interest that banks give to the federal government for loans
a. interest rate that banks pay the Federal Reserve for loans
*A bank that has demand deposits equal to $ 200 million and reserve requirement of 20% must hold reserves of a.$ 40 million and may loan $ 160 million. b.$ 160 million and may loan $ 40 million. c.$ 40 million and may loan $ 1,000 million. d.$ 2 million and may loan $ 198 million.
a.$ 40 million and may loan $ 160 million.
Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.10, and the monetary base is $100 million. What is the actual money supply? a.$ 400 million b.$ 200 million c.$ 100 million d.$ 300 million
a.$ 400 million
Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.10, and the monetary base is $100 million. What is the actual money supply? a.$ 400 million b.$ 200 million c.$ 100 million d.$ 800 million
a.$ 400 million
Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.40, and the monetary base is $200 million. What is the actual money supply? a.$ 400 million b.$ 200 million c.$ 100 million d.$ 800 million
a.$ 400 million
If the reserve requirement is 20% and a bank has $ 40 million in demand deposits, then how much must that bank hold in reserve? a.$ 8 million b.$ 400 thousand c.$ 80 million d.$ 16 million
a.$ 8 million
*Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.10, and the monetary base is $200 million. What is the actual money supply? a.$ 800 million b.$ 400 million c.$ 100 million d.$ 80 million
a.$ 800 million
.If the Federal Reserve increases the monetary base to $10 billion, the currency-deposit ratio is 0.20, and the reserve ratio is 0.20, the money supply will increase to a.$30 billion. b.$50 billion. c.$80 billion. d.$100 billion.
a.$30 billion.
If a single bank has excess reserves equal to $1000 and the reserve requirement is 20 percent, then it may lend a.$800. b.$200. c.$2000. d.$1000.
a.$800.
Which of the following is false? a.A bank can legally loan out all of its reserves. b.The major portion of the money supply is checkable deposits. c.A bank that is loaned-up may loan out more money by borrowing from other banks. d.The Discount Rate is the interest rate that the Federal Reserve charges banks for loans.
a.A bank can legally loan out all of its reserves.
Which of the following is false? a.A bank can legally loan out more than its excess reserves. b.The major portion of the money supply is checkable deposits. c.A bank that is loaned-up may loan out more money by borrowing from other banks. d.The discount rate is the interest rate that the Federal Reserve charges member banks for loans.
a.A bank can legally loan out more than its excess reserves.
Which of the following is false? a.Banks that are members of the Federal Reserve System are owned by the Federal Reserve district banks. b.Members of the Board of Governors are also members of the Open Market Committee. c.The members of the Board of Governors are appointed by the president (or past presidents) of the U.S. d.The Federal Reserve is operated by the Board of Governors.
a.Banks that are members of the Federal Reserve System are owned by the Federal Reserve district banks.
Which of the following is false? a.Recessions can only be caused by decreases in aggregate supply. b.An increase in aggregate demand may cause an increase in real GDP and inflation. c.Money is anything that is generally accepted in exchange for goods and services. d.Real GDP may remain constant while nominal GDP rises.
a.Recessions can only be caused by decreases in aggregate supply.
Which of the following is not a function of the Federal Reserve System? a.Slowing the velocity of money b.Serving as a bank for member banks c.Controlling monetary policy d.Issueing new currency
a.Slowing the velocity of money
If the economy is experiencing both growth and inflation, then which of the following has occurred? a.an increase in aggregate demand b.an increase in aggregate supply c.a decrease in aggregate demand d.a decrease in aggregate supply
a.an increase in aggregate demand
*Growth in real GDP and inflation are caused by a.an increase in aggregate demand. b.an increase in aggregate supply. c.a decrease in aggregate demand. d.a decrease in aggregate supply.
a.an increase in aggregate demand.
A tight money policy would include a.an increase in the discount rate, an increase in the reserve requirement, or the selling of bonds. b.a decrease in the discount rate, a decrease in the reserve requirement,or the purchasing of bonds. c.a decrease in the prime interest rate or a budget deficit. d.an increase in the amount of money that banks can loan.
a.an increase in the discount rate, an increase in the reserve requirement, or the selling of bonds.
A tight money policy will a.decrease the supply of loanable funds. b.shift the demand for loanable funds to the right. c.increase aggregate demand. d.result from a purchase of government securities by the Fed.
a.decrease the supply of loanable funds.
An increase in the reserve requirement by the Federal Reserve a.decreases the simple money multiplier. b.decreases a bank's reserves. c.increases the amount of money that banks can loan. d.increases the monetary base.
a.decreases the simple money multiplier.
*A decrease in aggregate demand will cause a.deflation and recession. b.an increase in nominal GDP and inflation. c.a recession and an increase in the price level. d.a rise and then a fall in the business cycle.
a.deflation and recession.
The discount rate is the a.interest rate that banks pay the Federal Reserve for loans. b.percentage discount that banks receive on purchases of stocks. c.interest rate that banks charge other banks for loans. d.discount on interest that banks give for government loans.
a.interest rate that banks pay the Federal Reserve for loans.
The discount rate is the a.interest rate that banks pay the Federal Reserve for loans. b.percentage discount that banks receive on purchases of stocks. c.interest rate that banks charge other banks for loans. d.discount on interest that banks give to the federal government for loans.
a.interest rate that banks pay the Federal Reserve for loans.
*The simple money multiplier (1/r) a.is used to predict the potential money supply from a given monetary base. b.predicts the change in deposits that results from a change in the reserve requirement. c.measures the ratio of currency in the hands of individuals to deposits in banks. d.is equal to the monetary base divided by the actual money supply.
a.is used to predict the potential money supply from a given monetary base.
*If a bank is "loaned up" a.it can loan more money by borrowing money from the Federal Reserve. b.it cannot loan any more money. c.then its excess reserves are equal to its required reserves. d.then its demand deposits are equal to its reserves.
a.it can loan more money by borrowing money from the Federal Reserve.
If the Federal Reserve wished to increase the money supply it may a.lower the reserve requirement. b.raise the discount rate. c.sell bonds. d.increase the velocity of money.
a.lower the reserve requirement.
If a bank is loaned up and the Federal Reserve increases the reserve requirement, then the bank a.may have to borrow money from another bank. b.may loan out its excess reserves. c.will be able to increase the money supply. d.loses reserves.
a.may have to borrow money from another bank.
If a bank is loaned up and the Federal Reserve increases the reserve requirement, then the bank a.may have to borrow money from the discount window. b.may loan out its excess reserves. c.will be able to increase the money supply. d.loses reserves.
a.may have to borrow money from the discount window.
When someone says that a shirt costs $ 5.00, that person is using money as a a.measure of value. b.store of value. c.medium of exchange. d.standard for deferred payment.
a.measure of value.
The means most often used by the Board of Governors to control the money supply is a.open market operations. b.by controlling the budget deficit of Congress. c.by controlling the prime interest rate. d.by regulating the activities of the U.S. Treasury.
a.open market operations.
*Which of the following is false? a. an economy that uses money is more efficient than a barter economy because money decreases the amount of resources that are devoted to making transactions b. full bodied money results in lower transactions costs than fiat money c. money is anything that is generally accepted in exchange for goods and services d. money in the U.S. is backed by the public's willingness to accept it in exchange for products
b. full bodied money results in lower transactions costs than fiat money
A money system is more efficient than a barter system because a. money increases the supply of resources. b. money lowers transactions costs. c. money provides a gold standard for the economy. d. banks can promote investments.
b. money lowers transactions costs.
A money system is more efficient than a barter system because a. money increases the supply of resources. b. money solves the problem of a double coincidence of wants. c. money provides a gold standard for the economy. d. banks can promote investments.
b. money solves the problem of a double coincidence of wants.
*If a bank has $ 30,000 in reserve, $200,000 in demand deposits, and the reserve requirement is 10%, then a.the bank is loaned up. b. the bank may loan out $10,000 more. c.the bank is in an illegal reserve position. d.the bank needs to borrow more money from the discount window.
b. the bank may loan out $10,000 more.
If the reserve requirement is 10% and a bank has $ 100 million in demand deposits, then how much must that bank hold in reserve? a.$ 1 million b.$ 10 million c.$ 100 thousand d.$ 100 million
b.$ 10 million
If the reserve requirement is 15% and a bank has $ 100 million in demand deposits, then how much must that bank hold in reserve? a.$ 1.5 million b.$ 15 million c.$ 150 thousand d.$ 100 million
b.$ 15 million
Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.40, and the monetary base is $100 million. What is the actual money supply? a.$ 400 million b.$ 200 million c.$ 100 million d.$ 800 million
b.$ 200 million
Suppose the currency/deposit ratio is 0.40, the reserve ratio is 0.40, and the monetary base is $200 million. What is the actual money supply? a.$ 400 million b.$ 350 million c.$ 200 million d.$ 150 million
b.$ 350 million
*Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.10, and the monetary base is $400 million. What is the actual money supply? a.$ 400 million b.$ 800 million c.$ 1200 million d.$ 1600 million
b.$ 800 million
A required reserve ratio of 15 percent means that a bank must hold $1500 in reserve if its demand deposits are equal to a.$1000 b.$10,000 c.$15,000 d.$1500
b.$10,000
Which of the following is false? a.The central bank of the U.S. is actually 12 district banks. b.Banks that are members of the Federal Reserve System own the Federal Reserve District Banks. c.The Board of Governors enact some monetary policies through the open bond market. d.The members of the Open Market Committee also serve on the Federal Advisory Council.
b.Banks that are members of the Federal Reserve System own the Federal Reserve District Banks.
Which of the following is false with respect to Gross Domestic Product? a.GDP = C + I + G + ( X - M) b.GDP = C + G + T + ( X - M) c.Nominal GDP is equal to the price level times real GDP, (P x Q). d.GDP is the dollar value of all final goods and services produced in an economy in one year.
b.GDP = C + G + T + ( X - M)
*Which of the following is not a requirement for a bank to become a member of the Federal Reserve System? a.It must join the Federal Deposit Insurance Corporation b.It must be a national bank c.It must purchase shares of stock in the Federal Reserve Bank in its district. d.It must hold a certain percentage of its demand deposits in reserve.
b.It must be a national bank
With regard to the equation of exchange (PQ = MV), which of the following is not true? a.P = the price level = b.Q = nominal GDP c.M = money supply d.V = velocity
b.Q = nominal GDP
Which of the following is false? a.Money is anything that is generally accepted in exchange for goods and services. b.Real GDP can only rise if the price level rises. c.Inflation can be caused by increases in aggregate demand or decreases in aggregate supply. d.An increase in aggregate demand may cause an increase in real GNP and inflation.
b.Real GDP can only rise if the price level rises.
Which of the following is false? a.The central bank of the U.S. is actually 12 district banks. b.The Federal Reserve System is owned by the Federal Government. c.The Board of Governors enact some monetary policies through the loanable funds market. d.The members of the Open Market Committee also serve on the Board of Governors.
b.The Federal Reserve System is owned by the Federal Government.
A system that uses money is more efficient than a barter system because a.money increases the supply of resources. b.a generally accepted medium of exchange lowers transactions costs. c.money is the source of all wealth. d.money is full bodied and represents a valuable output of the economy as well as a medium of exchange.
b.a generally accepted medium of exchange lowers transactions costs.
If the economy is experiencing both growth and deflation, then which of the following has occurred? a.an increase in aggregate demand b.an increase in aggregate supply c.a decrease in aggregate demand d.a decrease in aggregate supply
b.an increase in aggregate supply
An increase in aggregate supply will cause a.deflation and recession. b.an increase in real GDP and deflation. c.a recession and an increase in the price level. d.a rise and then a fall in the business cycle.
b.an increase in real GDP and deflation.
An increase in aggregate demand will cause a.deflation and recession. b.an increase in real GDP and inflation. c.a recession and an increase in the price level. d.a rise and then a fall in the business cycle.
b.an increase in real GDP and inflation.
6.Money is a.capital. b.anything that is generally accepted in exchange for products. c.a resource used in the production of goods and services. d.gold and silver certificates.
b.anything that is generally accepted in exchange for products.
*Banks can create money because a.congress has allowed them to do so. b.banks hold only a fraction of their demand deposits in reserve. c.this increases the velocity of money. d.for every dollar the banks have in demand deposits the Feds require that they hold a dollar in reserve.
b.banks hold only a fraction of their demand deposits in reserve.
*An increase in the transactions demand for cash will a.increase the monetary base. b.decrease the money supply. c.decrease the deposit multiplier. d.lower the currency-deposit ratio.
b.decrease the money supply.
An increase in the reserve requirement by the Federal Reserve a.increases the amount of money that banks can loan. b.decreases the simple money multiplier. c.decreases a bank's reserves. d.increases the monetary base.
b.decreases the simple money multiplier.
An easy money policy will a.increase aggregate demand and decrease the supply of loanable funds. b.increase aggregate demand and increase the supply of loanable funds. c.decrease aggregate demand and decrease the supply of loanable funds. d.decrease aggregate demand and increase the supply of loanable funds.
b.increase aggregate demand and increase the supply of loanable funds.
A decrease in the discount rate may increase the money supply because a.deficit spending by the federal government decreases when there are lower discounts. b.it encourages banks to borrow more money from the Federal Reserve. c.it promotes open market operations. d.it raises the currency-deposit ratio.
b.it encourages banks to borrow more money from the Federal Reserve.
If the Federal Reserve wished to lower interest rates, which of the following would it do? a.raise the reserve requirement b.lower the discount rate c.raise the federal funds rate d.sell bonds
b.lower the discount rate
*The Federal Reserve System a.was started in an effort to keep interest rates down. b.serves as the U.S. central bank. c.is a part of the U.S. Treasury. d.is governed by elected officials.
b.serves as the U.S. central bank.
When someone saves $ 5.00 in their piggy bank, that person is using money as a a.measure of value. b.store of value. c.medium of exchange. d.standard for deferred payment.
b.store of value.
If a bank has $ 15,000 in reserve, $200,000 in demand deposits, and the reserve requirement is 20%, then a.the bank is loaned up. b.the bank is in an illegal reserve position. c. the bank may loan out $20,000 more. d.the bank has borrowed to much from the discount window.
b.the bank is in an illegal reserve position.
If a bank has $ 25,000 in reserve, $200,000 in demand deposits, and the reserve requirement is 20%, then a.the bank is loaned up. b.the bank is in an illegal reserve position. c. the bank may loan out $20,000 more. d.the bank has $ 5,000 in excess reserves.
b.the bank is in an illegal reserve position.
A barter system is inefficient because a.it wastes money. b.too many resources are devoted to transactions. c.the transactions demand for cash causes trade barriers. d.the generally accepted medium of exchange becomes too expensive to produce.
b.too many resources are devoted to transactions.
*In the simple circular flow diagram of the economy: a. Households demand resources and businesses supply resources b. Households demand products and businesses supply resources c. Households supply resources and businesses supply products d. Households supply resources and businesses demand products
c. Households supply resources and businesses supply products
*Money as a standard measure of value gives the public an efficient method of a. exchanging goods b. storing wealth c. measuring the relative terms of trade or prices of goods d. making agreements i which money exchanged in the future will be contracted
c. measuring the relative terms of trade or prices of goods
If a bank has $ 40,000 in reserve, $100,000 in demand deposits, and the reserve requirement is 30%, then a.the bank is loaned up. b.the bank is in an illegal reserve position. c. the bank may loan out $10,000 more. d.the bank may loan out $70,000 more.
c. the bank may loan out $10,000 more.
If a bank has $ 30,000 in reserve, $100,000 in demand deposits, and the reserve requirement is 15%, then a.the bank is loaned up. b.the bank is in an illegal reserve position. c. the bank may loan out $15,000 more. d.the bank needs to borrow more money from the discount window.
c. the bank may loan out $15,000 more.
*A bank that has demand deposits equal to $ 100 million and reserve requirement of 15% must hold reserves of a.$ 85 million and may loan $ 15 million. b.$ 100 million and may loan $ 850 million. c.$ 15 million and may loan $ 85 million. d.$ 1.5 million and may loan $ 8.5 million.
c.$ 15 million and may loan $ 85 million.
If you deposit $ 1,000 in your checking account and the reserve requirement is 15%, then your bank will be able to increase its loans by a.about $ 6,667. b.$ 1,000. c.$ 850. d.$ 150.
c.$ 850.
If a bank receives $10,000 in cash from a depositor and the reserve requirement is 25 percent, then the bank may loan out a.$1,250. b.$2,500. c.$7,500. d.$50,000.
c.$7,500.
*Which of the following is false? a.The central bank of the U.S. is actually 12 district banks. b.Banks that are loaned up may borrow from other banks and pay the federal funds rate c.Before the Board of Governors can enact monetary policy, the policies must receive approval from Congress d.The members of the Federal Open Market Committee determine the amounts of bonds bought and sold on the open market
c.Before the Board of Governors can enact monetary policy, the policies must receive approval from Congress
Which of the following is false? a.Money is anything that is generally accepted in exchange for goods and services. b.Real GDP may remain constant while nominal GDP rises. c.Inflation can only be caused by increases in aggregate demand. d.An increase in aggregate demand may cause an increase in real GDP and inflation.
c.Inflation can only be caused by increases in aggregate demand.
Which of the following is not a desirable physical characteristic of money? a.It should be portable. b.It should be cheap to produce. c.It should be backed by gold. d.It should be easily recognized.
c.It should be backed by gold.
Which of the following is not a desirable physical characteristic of money? a.It should be portable. b.It should be cheap to produce. c.It should be easily counterfeited. d.It should be easily recognized.
c.It should be easily counterfeited.
*Which of the following is not a desirable physical characteristic of money? a.It should be divisible. b.It should be easily recognized. c.It should be made of very valuable material. d.It should be durable.
c.It should be made of very valuable material.
*Which of the following is false? a.The equation of exchange is always true. b.The major portion of the money supply is checkable deposits. c.The federal reserve system is owned and operated by the federal government. d.The discount rate is the interest rate that the Federal Reserve charges member banks for loans.
c.The federal reserve system is owned and operated by the federal government. (could be b as well)
Which of the following will cause a decrease in aggregate demand? a.a decrease in the price level b.a recession c.a decrease in the velocity of money d.an increase in the money supply
c.a decrease in the velocity of money
In making transactions, money solves the problem of a.unlimited wants and limited resources. b.self interest. c.a double coincidence of wants. d.finding people who want what you sell.
c.a double coincidence of wants.
*A decrease in aggregate supply will cause a.deflation and recession. b.an increase in real GDP and deflation. c.a recession and an increase in the price level. d.a rise and then a fall in the business cycle.
c.a recession and an increase in the price level.
*The Board of Governors of the Federal Reserve a.are elected by the U.S. Congress. b.advise the president's monetary policy. c.are appointed by U.S. Presidents. d.have no control of the money supply.
c.are appointed by U.S. Presidents.
The Board of Governors of the Federal Reserve a.are elected by the U.S. Congress. b.advise the president's monetary policy. c.are members of the Federal Open Market Committee. d.have no control of the money supply.
c.are members of the Federal Open Market Committee.
If a bank has no excess reserves and a customer comes in to borrow more money, what does the bank do? a.buys government securities b.raises its interest rates c.borrows from the discount window d.loans it to its best customers
c.borrows from the discount window
A tight money policy will a.increase the supply of loanable funds. b.shift the supply of loanable funds to the right. c.decrease aggregate demand. d.result from a purchase of government securities by the Fed.
c.decrease aggregate demand.
An increase in the transactions demand for cash will a.increase the monetary base. b.increase the money supply. c.decrease the actual money multiplier. d.lower the currency-deposit ratio.
c.decrease the actual money multiplier.
Money, when used as a medium of exchange, solves the problem of a.unemployment caused by the lack of transaction demand for workers. b.unlimited wants and limited resources. c.double coincidence of wants. d.macroeconomic evaluation of wants.
c.double coincidence of wants.
An increase in aggregate demand will cause a.deflation and recession. b.a decrease in nominal GDP and inflation. c.growth in real GDP and an increase in the price level. d.a rise and then a fall in the business cycle. e.recession in real GDP and deflation.
c.growth in real GDP and an increase in the price level.
An increase in the reserve requirement by the Federal Reserve a.increases the amount of money that banks can loan. b.increases the simple money multiplier. c.increases banks reserves. d.increases the monetary base.
c.increases banks reserves.
A decrease in the reserve requirement by the Federal Reserve a.decreases banks excess reserves. b.increases the monetary base. c.increases the amount of money that banks can loan. d.decreases the deposit multiplier.
c.increases the amount of money that banks can loan.
The simple money multiplier a.measures the ratio of currency in the hands of individuals to deposits in banks. b.is equal to the monetary base divided by the actual money supply. c.is inversely related to the reserve requirement. d.predicts the change in deposits that results from a change in the reserve requirement.
c.is inversely related to the reserve requirement.
A fractional reserve banking system has a great impact on the overall economy because a.fractional reserves require a large supply of cash to generate full employment. b.banks tend to make too much profit without the aid of government. c.it allows banks to create money. d.it creates a system in which banks almost never fail.
c.it allows banks to create money.
If a bank is "loaned up" a.it cannot loan any more money. b.then its excess reserves are equal to its required reserves. c.it can loan more money by borrowing money from the Federal Reserve. d.then its demand deposits are equal to its reserves.
c.it can loan more money by borrowing money from the Federal Reserve.
If the Feds decided to increase the money supply they could a.lower the discount rate, raise the reserve requirement, or sell bonds. b.sell bonds, raise the discount rate, or raise the reserve requirement. c.lower the discount rate, lower the reserve requirement, or buy bonds. d.raise the prime interest rate and engage in deficit spending.
c.lower the discount rate, lower the reserve requirement, or buy bonds.
To lower interest rates, the Federal Reserve may a.decrease the supply of loanable funds. b.sell bonds. c.lower the discount rate. d.lower the monetary base.
c.lower the discount rate.
If the Federal Reserve wished to increase the money supply, which of the following would it do? a.raise the reserve requirement b.raise the federal funds rate c.lower the interest it pays on banks' reserves d.sell bonds
c.lower the interest it pays on banks' reserves
If the Federal Reserve wished to increase aggregate demand, which of the following would it do? a.raise the discount rate b.raise the federal funds rate c.lower the reserve requirement d.sell bonds
c.lower the reserve requirement
A purchase of government securities by the Federal Reserve may not expand the money supply by the full amount predicted by the simple money multiplier (1/r) because a.banks may not hold excess reserves. b.banks may be loaned-up. c.people not may deposit all of the money in banks. d.new money from the Federal Reserve is high powered money.
c.people not may deposit all of the money in banks.
If a bank is "loaned up" a.it cannot loan any more money. b.then its excess reserves are equal to its required reserves. c.then its actual reserves are equal to its required reserves. d.then its demand deposits are equal to its reserves.
c.then its actual reserves are equal to its required reserves.
Interest rates are determined in the market for a. Federal Funds c. Demand deposits b. Consumption expenditures d. Loanable funds
d. Loanable funds
Which of the following is not a function of money? a. a store of value b. a medium of exchange c. a standard measure of value d. a means of capital accumulation
d. a means of capital accumulation
*Which of the following is not a function of money? a. a store of value b. a medium of exchange c. a standard measure of value d. a standard for capital accumulation
d. a standard for capital accumulation
Suppose that banks borrowed $ 5 million at the discount window. By how much will the banking industry eventually increase the money supply if the currency/deposit ratio is 0.20 and the reserve ratio is 0.40? a.$ 5 million b.$ 6 million c.$ 8 million d.$ 10 million
d.$ 10 million
If the reserve requirement is 20% and a bank has $ 80 million in demand deposits, then how much must that bank hold in reserve? a.$ 8 million b.$ 160 thousand c.$ 80 million d.$ 16 million
d.$ 16 million
If you deposit $ 1,000 in your checking account and the reserve requirement is 30%, then your bank will be able to increase its loans by a.about $ 6,667. b.$ 1,000. c.$ 850. d.$ 700.
d.$ 700.
Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.40, and the monetary base is $400 million. What is the actual money supply? a.$ 200 million b.$ 400 million c.$ 600 million d.$ 800 million
d.$ 800 million
If the monetary base was $5000, the potential money supply would be a.$10,000 if the reserve ratio is 20 percent. b.$100,000 if the reserve ratio is 20 percent c.$50,000 if the reserve ratio is 20 percent. d.$50,000 if the reserve ratio is 10 percent.
d.$50,000 if the reserve ratio is 10 percent.
*Gross Domestic Product is equal to a.C + I + T + (X - imports). b.C + G + S + (X - imports). c.C + G + T - (X + imports). d.C + I + G + (X - imports).
d.C + I + G + (X - imports).
*Which of the following is not a function of the Federal Reserve System? a.Issuing new currency b.Clearing checks c.Controlling the money supply d.Controlling the fiscal policy
d.Controlling the fiscal policy
Which of the following is not a function of the Federal Reserve System? a.Issuing new currency b.Clearing checks c.Controlling the money supply d.Controlling the velocity of money
d.Controlling the velocity of money
Which of the following is not a goal of macro-economic policies? a.Price stability. b.Sustained growth in real GDP. c.Low stable rates of unemployment. d.High stable interest rates for savers.
d.High stable interest rates for savers.
*Which of the following is not a goal of macro-economic policies? a.Price stability. b.Sustained growth in real GDP. c.Low stable rates of unemployment. d.Low stable rates of inflation.
d.Low stable rates of inflation.
Which of the following is false? a.Banks that are members of the Federal Reserve System must be members of FDIC. b.Members of the Board of Governors are also members of the Open Market Committee. c.The members of the Board of Governors are appointed by the president (or past presidents) of the U.S. d.The central bank of the U.S. is operated by the U.S. Treasury Department.
d.The central bank of the U.S. is operated by the U.S. Treasury Department.
*Which of the following is false? a.Aggregate demand will decrease if there is a decrease in the money supply. b.If the velocity of money increases then aggregate demand increases. c.Gross domestic product is the dollar value of all final goods and services produced in an economy in one year. d.The price level rises and national output remains constant if both aggregate demand and aggregate supply increase.
d.The price level rises and national output remains constant if both aggregate demand and aggregate supply increase.
With regard to the equation of exchange (PQ = MV), which of the following is not true? a.P = the price level b.Q = real GDP c.M = money supply d.V = velocity of output
d.V = velocity of output
*With regard to the equation of exchange (PQ = MV), which of the following is not true? a.P = the price level b.Q = real GDP c.M = money supply d.V = volume of money
d.V = volume of money
If the economy is experiencing both recession and inflation, then which of the following has occurred? a.an increase in aggregate demand b.an increase in aggregate supply c.a decrease in aggregate demand d.a decrease in aggregate supply
d.a decrease in aggregate supply
*Simultaneous inflation and recession are caused by a.an increase in aggregate demand. b.an increase in aggregate supply. c.a decrease in aggregate demand. d.a decrease in aggregate supply.
d.a decrease in aggregate supply.
*Which of the following must occur to achieve both price stability and growth in real GDP? a.an increase in aggregate demand and a decrease in aggregate supply b.an increase in aggregate supply and a decrease in aggregate demand c.a decrease in aggregate demand and a decrease in aggregate supply d.an increase in aggregate supply and an increase in aggregate demand
d.an increase in aggregate supply and an increase in aggregate demand
Which of the following will cause an increase in aggregate demand? a.a decrease in the price level b.a recession c.an increase in real GDP d.an increase in either the money supply or the velocity of money.
d.an increase in either the money supply or the velocity of money.
The Board of Governors of the Federal Reserve a.are elected by the U.S. Congress. b.advise the president's monetary policy. c.control of the velocity of money. d.are appointed by the president.
d.are appointed by the president.
A decrease in the transactions demand for cash will a.decrease the monetary base. b.decrease the money supply. c.decrease the simple money multiplier. d.decrease the currency-deposit ratio.
d.decrease the currency-deposit ratio.
A bank a.is safe against runs on the bank by its depositors. b.does not make any contributions to the money supply. c.holds 100 percent of its deposits in reserve. d.earns profits by loaning money deposited in checking accounts.
d.earns profits by loaning money deposited in checking accounts.
The currency-deposit ratio represents the a.ratio of a bank's cash reserves to its demand deposits. b.percentage of total income that people deposit into checking accounts. c.reciprocal of the simple money multiplier. d.ratio of the currency held by the public to money in checkable deposits. e.the ratio of money created by banks to banks' reserves.
d.ratio of the currency held by the public to money in checkable deposits.
*Banks have been holding large amounts of excess reserves because a.the government's supply of bonds has been low. b.the discount rate has been high. c.the reserve requirement has been high. d.the Federal Reserve has been paying them interest on reserves.
d.the Federal Reserve has been paying them interest on reserves.
*Banks create money when a.they sell securities to the Fed. b.the U.S. Treasury buys bonds from them. c.they accept deposits from the federal government. d.they take in deposits and make loans.
d.they take in deposits and make loans.
If the required reserve ratio is 2 percent, then the simple money multiplier is a.1.333. b.4. c.20. d.25. e.50.
e.50.
